Correlation Between Red Oak and Columbia Global

Can any of the company-specific risk be diversified away by investing in both Red Oak and Columbia Global at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Red Oak and Columbia Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Red Oak Technology and Columbia Global Technology, you can compare the effects of market volatilities on Red Oak and Columbia Global and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Red Oak with a short position of Columbia Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Oak and Columbia Global.

Diversification Opportunities for Red Oak and Columbia Global

0.75

Correlation Coefficient

Red Oak  Columbia Global

Poor diversification

The 3 months correlation between Red and Columbia is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Columbia Global Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Global Tech and Red Oak is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Red Oak Technology are associated (or correlated) with Columbia Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Global Tech has no effect on the direction of Red Oak i.e., Red Oak and Columbia Global go up and down completely randomly.

Pair Corralation between Red Oak and Columbia Global

Assuming the 90 days horizon Red Oak is expected to generate 1.16 times less return on investment than Columbia Global. But when comparing it to its historical volatility, Red Oak Technology is 1.08 times less risky than Columbia Global. It trades about 0.1 of its potential returns per unit of risk. Columbia Global Technology is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,284  in Columbia Global Technology on October 5, 2024 and sell it today you would earn a total of  4,175  from holding Columbia Global Technology or generate 79.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Red Oak Technology  vs.  Columbia Global Technology

Red Oak Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Oak Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Red Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Global Tech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Global Technology are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Columbia Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Red Oak and Columbia Global

The main advantage of trading using opposite Red Oak and Columbia Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak position performs unexpectedly, Columbia Global can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Columbia Global will offset losses from the drop in Columbia Global's long position.

The idea behind Red Oak Technology and Columbia Global Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.